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Monday, 27 March 2017
Page: 2208


Senator WHISH-WILSON (Tasmania) (13:03): I think one thing we all agree on here in the Senate is that everybody should pay tax. We probably also agree that everybody should pay their fair share of tax. However, I understand there will be some subjective disagreements on what that fair share is. I can guarantee one thing we also agree on is that for some people to pay no tax is totally unacceptable, and for corporations to pay no tax is totally unacceptable.

The combating multinational tax avoidance issue has been before us now for the last three years. We have had a series of legislation that we have scrutinised and voted on. A number of us have sat on the committees that have taken evidence in relation to these bills.

I want to step back a little bit further, before I talk to those specific pieces of legislation and the legislation in front of us today, and thank the stakeholders. Going back to 2012-13, stakeholders came and visited, I think, just about each and every one of us in our offices. I am talking about stakeholders such as Micah Challenge, and the various community groups who sat down with each senator and their staffers and said, 'This issue of multinational tax avoidance is a very serious one. Why is it that the government is not acting on chasing some of the biggest and wealthiest corporations in the world to make sure they pay their fair share of tax?'

The Tax Justice Network is one example of a volunteer, not-for-profit network of community groups, mostly church groups, who have spent years coordinating across the globe to provide information to senators, members of parliament and officials within government departments to make sure that we are well informed on the serious issue of tax avoidance—not just by multinationals, by wealthy individuals, by private companies and by public companies, including small companies. This is an issue that we face every day. I want to thank on the record all those people who have come up to Parliament, and recognise and reflect on the fact that sometimes democracy works really well. We listened, as did the fantastic journalists in this country, who have also been very dogged in their pursuit of getting tax justice more broadly for stakeholders, and in fact for all Australian taxpayers who pay their fair share of tax and for all citizens who vote in this country. This is an international effort. This is not just Australia acting unilaterally. This is part of the G20. It is part of much broader discussions about how, between countries, we can combat tax avoidance by megacorporations.

In the 2015-16 budget, the government introduced a package of three key reforms to combat multinational tax avoidance. The first bill was called MAAL, the multinational anti-avoidance law. It sought to stop multinationals with significant Australian activities booking profits overseas to avoid paying tax in Australia. There was a doubling of penalties for large companies that enter into tax avoidance or profit shifting schemes and there was country by country reporting, which required large multinationals, of over $1 billion in capitalisation, to report to the Australian Taxation Office their income received and tax paid in every country where they operate. The underlying principles of these measures—transparency and information—allow us to make decisions about who is and is not paying their fair share of tax. It is quite remarkable that in this day and age there is very little information sharing between countries and that there are very lax reporting standards, even within countries such as Australia.

I remember very well when that package came to parliament. We had previously had a bill—it was originally a Labor bill—for tax transparency, for both public and private companies over $100 million to disclose basic metrics about their tax affairs. I remember that bill very well, because I was sitting in the chair when the bill came to the Senate. The speaking list collapsed and the bill was voted down unopposed. I spoke to my party room about this issue, because it was obviously extremely important to stakeholders. When the MAAL bill came to the Senate, I put up as a cheeky amendment the previous bill on tax transparency. What transpired was a significant debate in this place. In the end, to get the bill through before the Christmas break, which was essential, because that was when the reporting was due to start—

Senator Dastyari: You really want to go there?

Senator WHISH-WILSON: Had that reporting not started then, we would have had to wait another 15 months to get transparency. The Greens managed to secure transparency for public companies of over $100 million in value and private companies of over $200 million. Would we have liked to have seen more companies thrown into the net? Yes, we would, but in the end we chose to get this essential reform through parliament. It was a pragmatic, important decision that has delivered us important first steps forward—albeit maybe baby steps. I do remember very well, Senator Dastyari, through you, Chair, that fantastic billboard you put up all around Sydney, saying that the Greens had voted down multinational tax transparency. There they were, Labor lies up on billboards for everyone to see. We hold no bitterness over that, because we are achieving something in parliament for the people who put us here. We are taking on the big end of town. We are making sure that they pay their tax that goes to school hospitals, to schools, to policing and to our social security net. If it is fair enough for us to be paying our fair share of tax and that that is enforced, then so should it be for big, wealthy corporations, who for too long have got away with simple things such as profit shifting, which brings me to the content of the bill today.

Schedule 1 of the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 seeks to amend the Income Tax Assessment Act 1936, the Taxation Administration Act 1953 and associated acts to introduce a new diverted profits tax, or DPT, from 1 July 2017. If the diverted profit tax applies, the Diverted Profits Tax Bill 2017 would impose tax on the amount of the diverted profit at the rate of 40 per cent. What do we mean by diverted profit? A diverted profit occurs where I as a company earn a profit and report it in a country other than my home country of Australia. Why would I do that? It is quite simple. In countries like Singapore the corporate tax rate is 15 per cent. We discovered in our Senate inquiry that some companies who, for example, were selling commodities like iron ore were saying, 'We're selling the iron ore at, let's say, $150 a tonne. We'll attribute $15 a tonne to the production of it in Australia. The other $135 of value comes from our trading arm in Singapore. Therefore, we'll divert our profits to be taxed at the lower rate in Singapore,' which means we in Australia miss out. That is what 'diverted profit' means, and this bill is designed to stop that. The bill is designed to crack down on entities that try and do that. The report of The Senate Economics Legislation Committee inquiry into the bill states that the primary objectives of the diverted profits tax are:

to ensure that the Australian tax payable by significant global entities properly reflects the economic substance of the activities that those entities carry out in Australia;

to prevent those entities from reducing the amount of Australian tax they pay by diverting profits offshore through contrived arrangements—

Let us be honest: unfortunately, a lot of these contrived arrangements have actually been legal. They are not ethical and they are certainly not moral, and they put a burden on low income Australians, especially, who have to pay their tax. But all these wealthy corporations have got away with it because our system is set up to allow them to avoid paying tax. This is trying to crack down on that. The last objective is:

to encourage significant global entities to provide sufficient information to the Commissioner of Taxation … to allow the timely resolution of disputes around Australian tax.

The report continues:

The DPT targets multinationals entering into arrangements with offshore related parties that lack economic substance, in order to divert their Australian profits to lower tax countries and avoid paying Australian tax.

This is not the same necessarily as we saw with the Panama papers, where individuals and companies were using a shadowy, murky set of tax arrangements across different companies set up in tax havens where there is no transparency. These are actually some very well known companies: we heard evidence about Apple, Microsoft and other technology companies that were not paying any tax in our country at all through their overseas arrangements. Ireland has been down this road and so has England, with what is called a Google tax, to try and crack down on this kind of thing. In fact, this legislation is very similar to that. The diverted profit tax:

… will apply to large multinationals considered to be significant global entities with annual global income of $1 billion—

one billion Australian dollars—

or more with total assessable income, exempt income and non-assessable non-exempt income—

try and say that one really quickly—

of more than $25 million with schemes that involve associated entities that do not have the economic substance to justify their income.

We will be supporting this legislation, but I will be putting up an amendment in the Committee of the Whole. At the moment, the bill gives the tax commissioner discretion to pursue, aggressively or otherwise, companies that are diverting 20 per cent or more of their tax. So what happens if a company is caught red-handed, let's say through an audit, of diverting 15 per cent of its tax? If that tax is in the hundreds of millions or billions of dollars, it is a lot of money we have to make up for by going after Australians to pay their tax or raising revenue through other measures. So the Greens would like to lower that threshold to 10 per cent and give the commissioner discretion to go after multinational corporations at a level of 10 per cent rather than 20 per cent. That allows us to capture more diverted profits in taxation. I think it is a more sensible and aggressive approach.

I am not exactly sure why 20 per cent was chosen as a benchmark by the government. I know there are always costs and benefits of going after multinational corporations. Sadly, as we found out in our committee, when the tax office takes on the big end of town the legal cases can go on for a decade. In fact, some are still going on after five or six years and these corporations still have not paid any tax. I understand that the ATO has to commit taxpayer funds in the first place to pursue some of these companies and perhaps they look at it on a risk-weighted basis, as in, it is not worth going after companies with less than 20 per cent, but, I would like to hear that justification from the Treasurer or from Senator Cormann on behalf of the Treasurer. This is not a second reading amendment. The Greens will be putting up an amendment in the Committee of the Whole.

I have still got a few minutes to go, but I will not take up any more of the Senate's time. We have a lot of legislation to go. I am proud to be a part of the Senate that worked with the government and with Labor and with the crossbenchers to introduce a second substantial set of legislation that actually takes on multinational tax avoidance. There is still a lot more we can do. There are other countries looking at what we are doing here in Australia. Some are even criticising us for doing this without a global agreement, so I do commend the government for getting on with this. I know Labor has some track record going back over the years with tackling this issue.

I have already thanked the stakeholders who brought this to our attention. Lastly, I would like to thank one of my predecessors, a former senator, Christine Milne, who used to sit in this chair here, who led the party room after the resignation of Bob Brown. It was Christine who introduced and got up the first Senate inquiry into multinational tax avoidance on behalf of the community groups that came to see them. Senator Ketter, Senator Dastyari and others in this chamber were all a part of that inquiry. It has put pressure on the government. The Senate has done its job by scrutinising this issue and putting pressure on the government to deliver this legislation. We need to keep that pressure up, because we still have a long way to go and there are still a large number of measures. In fact, the Greens put up nearly 22 extra measures at the last election on what we can do to tackle multinational tax avoidance. We have still got a long way to go, but this is a great step forward. I look forward to speaking to my amendment in Committee of the Whole.